6 Things That Will Help Health Care Move from Volume to Value

Posted on November 8, 2016

In the world of American health care, the volume-to-value revolution is fast approaching. It is all too clear that the dominant fee-for-service model—which is based on incentives for over-provision of services rather than for actually improving patient health and coordinating patient care—must be completely overhauled. Despite the fact that per capita health spending in the US is twice that of countries like the UK, our health outcomes and health indicators are actually worse.

Fortunately, in response to this unsustainable phenomenon of not getting what we pay for, the fundamental shift from paying for volume to paying for value has already begun. Recent years have seen the development of more and more alternative payment models that are gradually helping to rationalize health care delivery and provide better health outcomes for patients.

But while smaller efforts are certainly making a difference, scaling these efforts up across the entire system will require specific and dedicated action. A recent Forbes article outlines six key actions that must happen in order to achieve a comprehensive volume-to-value shift.

An acceptance of initial revenue loss.

There’s no way around it: a move from volume- to value-based payments will result in most providers experiencing revenue losses in the short term. It’s this fear of a blow to the bottom line that has kept many hospitals and physician practices from embracing value-based payment models, and while it’s easy to understand this attitude, it’s also clear that major and much-needed systemic change is not going to happen without some initial sacrifices.

The key is for providers to focus on the opportunities that can come from greater patient satisfaction through better care delivery. While today’s providers must often fight for patients, value-driven providers will likely find that the better outcomes and enhanced satisfaction they can deliver to patients results in greater loyalty over the long term.

Greater investment in health IT.

A substantial front-end investment in health IT systems is one of the biggest efforts that can be made to clarify costs and identify and reduce inefficiencies throughout the health care system. One of the top priorities in this area is the implementation of interoperable electronic health records, which will be critical to the delivery of better and more efficient care.

Continued leadership from large systems.

Major systems like large employers or pension funds have a key role to play in systemic transformation because they are able to catalyze changes in provider and consumer behavior on such a significant scale. Happily, many such organizations are readily taking on this task.

A recent example comes from California, where the CalPERS retirement program for state employees recently launched a new cost-sharing methodology known as reference-based pricing. Under this model, CalPERS set a cap on the amount it would pay for hip and knee procedures, requiring that costs surpassing the cap would be borne by the patient.

The results of this pilot program were impressive: low-priced hospitals grew their market share from 48% to 63% and high-priced hospitals saw their market share drop from 52% to 37%, resulting in spending savings in the millions of dollars. Furthermore, this change in consumer choices even prompted the higher-priced facilities to reduce their prices by 25% over a two-year period.

Greater awareness of the true cost of care.

People on both sides of the health care equation must know and become better informed about the actual cost of care, as neither consumers nor physicians can truly consider what value means if they do not know what the real costs are. However, this is currently easier said than done. At present, for every service unit delivered, there are a staggering five different charges, of which the actual cost is just one—the others include the private insurance negotiated rate and the hospital “chargemaster” rate. But clearing up this confusion could have measurable effects. Studies have shown that when doctors know the actual price of tests and other orders, they tend to order more appropriately and eliminate unnecessary tests.

More outpatient care.

Ambulatory surgery centers and other facilities focused on outpatient care are having a transformative effect on health care delivery, as they are typically able to provide greater patient convenience and satisfaction at a significantly lower cost. At present, such facilities tend to operate independently, but expanding their scope and making them a more fully integrated part of clinical networks could bring about substantial system savings.

Clearly defined regulatory standards for success.

In order for real systemic change to happen, the standards for success must be clearly outlined by regulators. For example, last year saw the release of the proposed rule for eligibility and performance measures for merit-based incentive payments under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Without such rules and standards, it becomes too easy for providers to make token billing changes that never evolve into true value measures.